Medicare Site Neutral Payments – Changing Healthcare

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Medicare Site Neutral Payments – Changing Healthcare

To preface, Medicare site neutral payments refer to the technical portion of outpatient bills. This does not refer to drug reimbursement cuts down to ASP minus 22.5% for 340B sites, which is a totally different topic (especially with a federal court judge determining that the drug reimbursement Part B cuts by Medicare are in violation of federal law). Site neutrality is the Medicare change in reimbursement to mimic private physician billing and hospital outpatient departments that are more than 250 yards away from a hospital. This financial payment reduction is not 340B specific and applies to all hospitals. 

This all started on November 2nd, 2015 when Medicare announced that hospital outpatient departments not already in operation or not in the process of being built would start receiving a decrease in technical payment if they are more than 250-yards away from the hospital. The decrease in reimbursement made to hospital outpatient departments was roughly 40% of the original hospital outpatient payment rate. The goal was to neutralize payment for similar services, when not on a hospital campus. The thought is that if the hospital outpatient department (HOD) is not on a hospital campus, then the HOD likely has similar benefits as a comparable non-hospital service. 

The sites that were already in place prior to November 2nd, 2015 are considered “grandfathered” into the hospital outpatient payment rates; however, as of January 1st, 2019 even these grandfathered sites reimbursement is being reduced specifically for evaluation and management (E&M) visit HCPCS code G0463. This is physician clinic focused and will impact provider-based clinics. Medicare is phasing in the E&M payment cut over 2-years. In 2019 it will be 70% of the hospital outpatient payment and in 2020 it will go down to the full 40% of the hospital outpatient payment. 

Does this affect free-standing emergency departments (EDs)? Not yet, Medicare is going to continue to reimburse free-standing EDs at the current hospital outpatient payment rate. However, CMS is adding another modifier (i.e., ER) for off-campus EDs to monitor services being provided. To note, in the original 2015 rule a PN and PO modifier were added for off-campus provider-based departments. PN is for non-excepted (not grandfathered) and PO for excepted (grandfathered). Of course, as noted above, even the PO sites have reduced reimbursement for E&M visits starting in 2019 (which must make them PO’ed, sorry, I had to get some humor in here). Therefore, it is both possible and likely that we will see off-campus ED payment reduction in the future if CMS determines a site neutral payment is needed. 

With payment cuts to technical services and drug reimbursement, these two items are often confused or mixed. We hope this article helps to clarify what is going on regarding the technical reimbursement from Medicare. It is unlikely these payment cuts will go away; however, we are hopeful the drug reimbursement cuts to 340B hospitals will finally stop this year, but only time will tell. If you have further questions on this subject or how it impacts you, please send us an email.


About Author

Rob Nahoopii, PharmD, MS, 340B ACE

Experience as a Director of Pharmacy for a 400 bed DSH hospital (also served as a regional director of pharmacy). Rob has presented at many 340B University sessions and on the topic of 340B at numerous other conferences around the country. He has provided many external 340B audits for various covered entity types, and onsite support for multiple 340B HRSA audits. Rob is part of our 340B independent auditing team and also supports our maintenance clients and 340B implementation. His perspective is from front line pharmacy leadership and program compliance.

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